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Author: 


New  York  (State). 


Title: 


Retail  grocery  stores 


Place: 


Albany 

Date: 

1922 


MASTER    NEGATIVE   « 


COLUMBIA  UNIVERSITY  LIBRARIES 
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Now  York  (State)  Department  of  farms  and  mii'rkets. 

Retail  grocery  stores i  a  study  of  certain  pro- 
blems of  the  retail  grocer  in  New  York  City,  in- 
cluding the  results  of  investigations  conducted 
during  the  war  period  by  the  New  York  federal  food 
board  and  the  New  York  State  food  commission, .• 
Albany,  New  York  State  department  of  farms  and 
markets,  1922 • 

30  p.     illus,,  tables.     24S-  cm. 


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RETAIL  GROCERY  STORES 


r" 


A  Study  of  Certain  Problems  of  the 
Retail  Grocer  in  New  York  City 


/ 


INCXUDING   THB 


/ 


Results  of  Investigations  Conducted  During  the 

War  Period  by  the  New  York  Federal 

Food  Board  and  the  New  York 

State  Food  Commission 


LIBRARY 
SCHOOL  OF  BUSINESS 

PUBLISHED  BY  THE 
NEW  YORK  STATE  DEPARTMENT  OF  FARMS  AND  MARKETS 


t. 


1^ 


ALBANY 

J.  B.  LYON  COMPANY.  PRINTERS 

1922 


LIBRARY 


Columbia  ?Hmbersiap 

intbtCitpof^etotorb 


School  of  Business 


^1^ 


RETAIL  GROCERY  STORES 


A  Study  of  Certain  Problems  of  the 
Retail  Grocer  in  New  York  City 


INCLUDING    THE 


Results  of   Investigations   Conducted  During  the 

War  Period  by  the  New  York  Federal 

Food  Board   and  the  New  York 

State  Food  Commission 


PUBLISHED  BY  THE 
NEW  YORK  STATE  DEPARTMENT  OF  FARMS  AND  MARKETS 


ALBANY 

J.  B.  LYON  COMPANY,  PRINTERS 

1922 


K 


h 


I 


INTRODUCTORY  NOTE 


During  the  \\ar  the  Xew  York  Federal  Food  Board,  which  was  a  consolida- 
tion of  federal  and  state  food  administration  agencies  carried  on  extensive 
investigations  as  to  the  costs  of  operating  retail  stores  in  New  York  City, 
these  investigations  were  undertaken  primarily  to  furnish  a  reliable  basis  for 
determining  the  fair  margins  of  profit  issued  by  the  Board.  A  larcre  force  of 
inspectors  and  accountants  were  put  on  the  work  over  a  period  of  several 
months  and  all  results  were  verified  repeatedly  so  that  the  Board  might  be 
able  to  say  accurately  just  what  were  the  proportionate  volume  of  business 
m  different  commodity  groups  and  the  elements  of  cost  in  operation  of  retail 
grocery  and  meat  shops.  ^  ic^ai* 

.1  J^^f"  ^^^  ^'"™lxr^r^  ^^""^  *^®  government  price  regulating  work  came  sud- 
denly to  an  end.  With  far-seeing  appreciation  of  the  scientific  permanent  value 
of  these  research  studies,  however,  Mr.  John  Mitchell  the  Chairman  of  the 
Board  and  President  of  the  New  York  State  Food  Commission,  arranged  for 
salvaging  the  results  of  the  investigations  in  three  reports  on  retail 
grocery  stores,  Gentile  butcher  shops  and  Kosher  butcher  shops.  With  tne 
termination  of  the  existence  of  the  temporary  war-time  food  administrative 
agencies,  tliese  reports  were  turned  over  to  the  permanent  State  Department 
of  Farms  and  Markets  for  publication.  i'  no 

The  Retail  Grocery  Report  is  here  presented.  The  two  other  reports  on 
co^s  of  operation  of  butcher  shops  are  still  in  manuscript  form 

rhese  studies  were  planned  and  initiated  by  George  L.  Bennett,  Assistant 
pirector  of  Transportation  and  Distribution,  and  were  carried  out  under  his 
leadership.  The  investigational  work  and  compilation  was  performed  under 
the  supervision  of  Mr.  John  J.  Pollock,  who,  in  the  latter  davs  of  the  Board's 
"^^ri  '^^\  succeeded  Mr.  Bennett  as  Assistant  Director.  The  computations 
and  tabulations  were  under  direct  charge  of  Mr.  I.  Finkelstein.  Acknowledg- 
ment IS  due  these  gentlemen  for  the  great  assistance  which  thev  have  rendered 
m  the  preparation  of  this  data  for  publication. 

The  text  was  written  and  the  illustrations  were  designed  bv  Miss  Edith  J 
FaTmf  anlr'Markets'^'*''''  ""^  publications,  New  York  State '  Department  of 
Since  1918,  when  this  investigation  of  retail  grocery  stores  was  made,  costs 
have  increased  considerably,  but  they  are  now  lowering  again.  There  are 
reasons  to  expect  that  the  more  stabilized  conditions  of  the  near  future  will 
approximate  those  of  1918.  But  irrespective  of  whether  this  is  or  is  not  the 
case,  there  is  presented  herein  so  much  information  of  a  sort  never  before 
made  public  and  which  can  be  so  easily  changed  to  fit  to  the  conditions  of 
to-day  and  to-morrow  that  the  New  York  State  Department  of  Farms  and 
Markets  believes  this  report  will  be  of  great  service  to  the  public  and  to  the 
grocers  themselves. 


•y 


Lii 


^HWI.'^ 


^asm^ 


A  Study  of 
Certain  Problems  of  the  Retail   Grocer 

It  is  the  aim  of  this  bulletin,  first,  to  present  to  the  consumer 
certain  viewpoints  on  the  pi-oblems  of  the  retail  grocer  and  their 
reaction  on  the  prices  he  pays  for  his  food,  and  further  to  set 
before  the  grocer  himself  the  results  of  investigations  made  in 
May,  1918,  of  a  representative  number  of  typical  grocery  stores  in 
Xew  York  City.  Conditions  or  type  and  quantity  of  products 
purchased  may  diifer  for  other  cities,  but  with  the  data  given  for 
guidance  it  is  anticipated  the  grocer  can  compare  the  status  of  his 
own  business  and  perhaps  discover  one  or  two  new  angles  from 
which  to  approach  his  own  problems. 


VOLUME  OF  TRADING 

In  this  study  the  sum  total  of  the  retail  grocer's  purchases  is 
designated  as  his  volume  of  trading.  In  certain  commodities  his 
volume  of  trading  is  large.  In  others  it  may  be  very  small.  These 
facts  are  set  forth  clearly  in  Table  1,  which  presents  a  summary  of 
a  detailed  study  of  the  purchases  made  by  58  grocery  stores  in 
Greater  New  York  for  the  year  1917,  selected  as  being  representa- 
tive of  all  conditions  of  trade. 

This  study  was  made  up  by  analyzing  the  purchase  bills  of  the 
58  stores  for  a  period  of  one  year.  Purchase  bills  were  analyzed 
in  preference  to  sales  slips  (purchases  by  customers)  in  order  to 
save  the  immense  amount  of  labor  that  such  procedure  would  have 
involved.  Had  the  sales  slips  been  analyzed,  the  only  differences 
that  should  occur  between  purchases  and  sales  would  be  those 
ascribable  to  products  that  deteriorated  to  such  an  extent  as  to 
be  unfit  for  human  consumption  and  to  variations  in  profits. 
Intelligent  buying  and  handling  make  these  differences,  for  staple 
products,  a  comparatively  negligible  factor,  or  in  other  words, 
analysis  of  purchase  slips  may  be  expected  to  give  a  fair  indi- 
cation of  relative  sales  when  relative  profits  are  considered. 

[5] 


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i 


''""aA-^sI^'^T^cIIT^^^         IX    PEHCE.TAOE,   ^    EVXOE.CE.  PKOH    .X 

IN  New  Yobk  Cot?  '^'^   Representative    Gbocery   Stores 

Dain/  Products  and  Eggs 

Butter    Per  cent. 

Butter  substitutes ^^ . 8 

Eg-s 1 

Milk '.'.'.'.'.'.'.". 12-2 

Cheese   [      8.2 

Bread  and  Flour                      ^2 

Bread 35 . 5 

\Mieat  flour  ......* 9.5 

Crackers  and  cake* .....[,, 2.3 

Macaroni  and  g-  a^lietti ^-^ 

Other  flc.ur  ...  ^.  fl ... .]]'.',,]] -5 

Vanned  Ooods                               •  ^ 

Condensed  and  evar orated  milk  ~        ^^'^ 

Fish    2.9 

Tomatoes  ..,', 1.0 

"^Peas   '.'.'.'.'.'.'.[ 1-3 

Soup , .8 

^Boans •  ^ 

-  Corn     ...  .7 

Other  ( anned  ffoods         -^ 

Fruit-;    .  .  :  •  •  .4 

Sugar,  Syrups  and  Pi  eserves  «  -r 

Sunfar "  9-7 

Molasses  and  i^yrups ^ -^ 

Jams  and  preserves -^ 

Fresh  Vegetahles  '^ 

Potatoes    ...  ~~         ■  ^-9 

Onions ."  .' 2.9 

Others •  ^ 

Miscellaneoits  Foodstuffs  ^'^' 

Xut.^,  spic  s,  condiments,  relishes,  etc 

Coffers  and  Teas  **  •  ^ 

Cofl-ee    

Tea     ■  *  ■  ■ 2.6 

Cocoa,    Chocolate,   etc ^-^ 

.5 

Soaps  and  Soap  Powders ^^ 

Miscellaneous  Commodities  ^  *  ^ 

Polish,   brocm^,  etc 

Cereals  2.7 

Cornm^al    ... 

Rice    '.'.'.'.'.'.'.'..'. ^ 

Barley   [[    [ -9 

Packag  d   cereals ^ 

Other  cereals  ^  •  2 

.1 

Fresh  Fruits    2 . 4 

Dried  Fruits  2.3 

Prunes  ....  ,        . 

i^i^ins  ....;;;;:;;:: .8 

others   .3 

Dried  Vegetahles    ^^ 

Beans    1.6 

Peas     .7 

Others    .    .      .2 

.1 

Lard   1.0 

Lard  substitutes        ^ 

2 

Total    ^  ' 

100.0 


Allowing  100  per  cent  to  stand  for  gross  purchases,  the  account- 
ants engaged  in  this  study  computed  in  percentages  the  relative 
volume  of  trading  for  each  commodity  handled,  arranging  the 
commodities  in  groups  with  subtotals  for  each.  These  percentages 
are  presented  with  some  degree  of  assurance,  since  after  forty 
businesses  had  been  analyzed  there  was  practically  no  variation 
when  the  further  data  were  added,  the  results  of  the  analyses  for 
the  first  forty  businesses  being  practically  identical  with  those  of 
the  fifty-eight  businesses  ultimately  analyzed. 


.  •*'.  • 


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lALL   OTHERtiiE: 


ii;:;^ PRODUCTS  purchased! 


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:\•_.^;..^~::.:_^;V/.;V••.^..;.;.•..•_\^•.;.v.y.:;;^■:v.^•;^•■.:.;^,^••v:;^  •.^. ■.••■.- .■•.•.•::.••*;;: 

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ISUGAR. 
17.9 


BREAD 
9.5 


lEGOd 

112.21 


Fig.  I. —  The  Accompanying  Graph  Shows  What  Merchandise  the  Grocer 

Buys  for  Each  Dollar  Spent. 

The  first  or  dairy  products  groups  of  percentages,  with  a  total 
of  35.5  per  cent,  is  the  largest,  constituting  more  than  one-third 
of  the  total  volume  of  business.  The  bread  and  flour  group  is 
second  with  a  total  of  16.3  per  cent,  canned  goods  third,  its  total 
being  9.7  per  cent.  Arranged  in  order  of  descending  percentages 
of  purchase  for  their  respective  totals,  the  remaining  groups 
are  the  following:  sugar,  molasses,  and  preserves;  fresh  vege- 
tables; coffee;  nuts  and  spices;  soap  and  powders;  polishes  and 
brooms ;  cereals ;  fresh  fruits ;  dried  fruits ;  dried  vegetables ;  and 


II 


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8 

lard  and  lard  substitutes.  In  Fig.  1,  for  which  Table  1  is  the 
basis,  the  relative  proportions  of  trading  in  each  group  are  graphi- 
cally set  forth,  indicating  the  contrasts  in  total  gross  sales  for  the 
various  groups  of  commodities  handled. 

^  Proceeding  from  the  consideration  of  the  percentages  of  trading 
m  Table  1  by  groups  to  that  of  volume  of  trading  in  individual 
products,  it  is  interesting  to  find  that  the  largest  group  — that  of 
dairy  products  —  contains  the  two  largest  single  items  of  businej^s 
—  butter  with  a  volume  of  13.8  per  cent  and  eggs  with  a  volume  of 
12.£'  per  cent.  Butter  and  eggs  alone  it  would  appear  from  the 
compilation  constitute  one-fourth  the  average  grocer's  trade,  while 
milk  from  the  same  group  with  a  volume  of  sales  of  8.2  per  cent, 
bread  from  the  second  gi-oup  at  9.5  per  cent,  and  sugar  from  the 
fourth  group  at  7.9  per  cent  total  a  second  quarter,  or  25.6  per 
cent.  Obviously  then,  more  than  50  per  cent  of  the  business  done 
m  fifty-eight  stores  in  Kew  York  City  in  1917,  was  done  in  the 
five  staple  commodities  ~  butter,  eggs,  milk,  bread,  and  sugar. 

In  Table  1  the  precise  number  of  products  handled  is  not  shown. 
Certain  gioup  products,  such  as  "  crackers  and  cake,"  "  other 
vegetables,"  "  nuts  and  spices,"  "  jams  and  preserves,"  suggestinij 
substantial  lists  in  themselves  would  lengthen  the  fifty  entries 
already  set  forth  indefinitely.  Yet  this  unnumbered  variety  of 
products  constituting  the  stock  in  trade  of  the  retail  gi-ocery  store 
aside  from  the  five  items  already  mentioned  —  butter,  e^gs,  milk, 
bread,  and  sugar  —  constitute  but  48.4  per  cent  of  the  whole  vol- 
ume of  purchases,  or  the  difference  between  100  per  cent  and  51.6 
per  cent  as  shown  in  Fig.  2. 

In  the  foregoing  it  has  been  shown  that  approximately  50  per 
cent  of  the  money  paid  out  by  the  gi-ocer  for  his  stock 'in  trade 
goes  for  butter,  eggs,  milk,  bread,  and  sugar.  It  is  of  interest  to 
follow  the  accumulated  data  somewhat  further  and  to  note  for 
certain  products  how  percentage  of  gross  profit  hosed  on  soiling 
price  compares  with  the  percentages  of  total  trading  just  analyzed. 
In  Table  2,  65  per  cent  of  the  total  volume  of  trading  has  been 
itemized  and  the  items  arranged  descendingly  in  order  of  their 
respective  volumes,  which  have  been  taken  from  Table  1.  In  each 
case  column  2  shows  the  purchase  price  per  unit  (pound,  dozen. 


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quart,  or  can,  as  the  case  may  be) ;  column  3,  the  selling  price  per 
unit;  column  4,  the  gross  profit  per  unit;  and  column  5,  the  per- 
centage of  gross  profit  based  on  selling  price,  or  the  datum  in 
column  4  divided  by  the  corresponding  datum  in  colunm  3.  Des- 
pite the  fact  that  the  five  products  previously  referred  to  have  the 
largest  relative  volumes  of  trading,  an  examination  of  column  five 
will  show  that  their  respective  percentages  of  gross  profit  based  on 
selling  price  per  unit  are  in  each  case  less  than  the  respective  per- 
centages of  gross  profit  for  any  of  the  other  products  listed  in  66 
per  cent  of  the  total  volume  of  trading. 

Table  2. —  Relati\t:  Volibie  of  Trading  and  Percentage  of  Gross  Profit 
FOR  Certain  Commodities,  Totaling  65  Per  Cent  of  the  Grocer's 
Volume  of  Pltichasing.* 


COMMODITY 


Percentage 
of  total 
trading 

(per  cent) 


Average 
cost  per 

unit 
purchase 

(cents) 


Butter 

Eggs 

Bread 

Milk 

Sugar 

Potatoes 

Flour 

Canned  fish 

Canned  tomatoes . 

Cheese 

Rice 

Onions 

Canned  peas 

Beans 

Canned  corn 

Raisins 

Cornmeal 


Subtotal . . , 
Other  products . 


Total. 


13.80 
12.20 
9.50 
8.20 
7.90 
2.90 
2.30 
1.60 
1.30 
1.20 
.90 
.90 
.80 
.70 
.40 
.30 
.10 


Average 

seUing  price 

per  unit 

(cents) 


65.00 
35.00 


100.00 


70.50 
65.50 
7.50 
12.46 
9.35 
3.25 
6.37 
18.25 
12.75 
39.50 
11.50 
2.25 
14.75 
13.33 
15.50 
13.00 
5.00 


Average 

gross  profit 

per  unit 

(cents) 


Percentage 

of  gross 

profit  based 

on  selling 

price 


76.50 
72.50 
8.62 
14.23 
10.35 


25 
37 


22.75 
16.00 
46.50 
13.50 

3.75 
18.25 
16.33 
19.00 
15.50 

6.62 


6.00 

7.84 

7.00 

9.65 

1.12 

12.99 

1.77 

12.44 

1.00 

9.66 

1.00 

23.53 

1.00 

13.56 

4.50 

19.78 

3.25 

20.31 

7.00 

15.05 

2.00 

14.81 

1.50 

40.00 

3.50 

19.18 

3.00 

18.37 

3.50 

18.42 

2.50 

16.16 

1.62 

24.16 

♦  Prices  prevailing  in  April,  1918. 

Butter,  which  has  the  largest  volume  of  trading  of  any  product 
sold,  shows  the  least  percentage  of  profit  per  y/nit  (pound)  ;  eggs, 
which  stand  second  in  volume,  show  the  next  least  percentage  of 
profit  per  unit  (dozen),  being  almost  tied  with  sugar,  which  in  the 
volume-of-trading  column  ranks  fifth.  Bread  and  milk,  the  third 
and  fourth  items  in  Table  2,  make  relatively  larger  percentages  of 
profit  per  unit  (loaf)  and  per  unit  (quart)  respectively;  yet  not 


11 


one  of  these  ^\e,  which  constitute  better  than  50  per  cent  of  the 
volume  of  trading,  made  as  large  a  per  unit  profit  as  did  any  one 
of  the  other  twelve  items,  which  constitute  the  remaining  15  per 
cent  in  the  65  per  cent  of  the  volume  of  trading  itemized.  To 
make  this  point  clear  the  percentages  of  gross  profit  based  on 
selling  price  have  been  arranged  in  descending  order  in  Table  3, 
bread,  milk,  sugar,  eggs,  and  butter  being  found  at  the  foot  of  the 
list.    These  statistics  are  also  set  forth  graphically  in  Fig.  3. 

Table  3. —  Percentages  of  Gross  Profit  Based  on  Sexling  Price,  Arranged 

IN  Descending  Order  for  65  Per  Cent  of  the  Grocer's  Total  Volume 

of  Trading,  Accompanied  by  Percentages  of  Volume  of  Purchase. 

Percentage 
of  gross 
Percentage    profit  based 
of  total       on  selling 
Commodity  trading  price 

Onions   .90  40 .  00 

Cornmeal    .10  24 .  16 

Potatoes    2 .  90  23.53 

Tomatoes    1.30  20.31 

Canned  fish   1.60  19.78 

Canned  peas .80  19.18 

Canned  corn .40  18.42 

Beans 70  18.37 

Raisins    .30  16.16 

Cheese    1.20  15.05 

Rice    90  14.81 

Flour  2.30  13.56 

Bread 9.50  12.99 

Milk 8.20  12.44 

Sugar     7.90  9.66 

Eggs     12.90  9.65 

Butter   13.80  7.84 

Merely  as  an  indicator,  we  might  here  make  reference  to  the 
percentage  of  average  gross  expense,  appearing  in  column  4  of 
Table  4,  page  14,  which  the  reader  will  find  to  be  14.1  per  cent. 
He  will  be  interested  in  noting  that  this  figure  is  larger  than  the 
average  gross  profit  for  any  one  of  the  five  items  making  up  the 
larger  half  of  the  total  volume  of  trading.  By  featuring  the  per- 
centage in  this  connection  we  do  not  mean  to  imply  that  butter, 
eggs,  bread,  milk,  and  sugar  are  necessarily  sold  at  a  loss.  These 
commodities  are  in  many  instances  used  as  leaders  to  attract 
trade  and  to  help  sell  other  articles  in  which  the  main  profits 


12 


if) 
z 
o 

z 
o 


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uJ 

Z 
tiL 
O 
O 


O 

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H 
O 
a 


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z 

«o 

z 

m 

bl 

0 

< 

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Z 

0 

2 

2 

UJ 

0 

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Z       ui 


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13 

are  made.  To  answer,  therefore,  the  question  of  whether  or 
not  the  sale  of  these  products  constitutes  a  real  loss  to  the  business, 
one  must  first  apply  not  the  average  cost  of  doing  business  for  all 
commodities,  but  the  actual  cost  of  doing  business  for  each  particu- 
lar commodity,  and  secondly,  the  economic  criterion  whether  the 
net  profits  of  the  business  as  a  whole  would  increase  or  diminish  if 
the  volume  of  trading  in  these  items  were  respectively  increased  or 
diminished  at  the  expense  of  the  volume  of  trading  in  other 
items.  The  significance  of  the  percentage  14.1,  therefore,  lies  only 
in  its  wai-ning  to  the  grocer  of  the  importance  of  analyzing  his 
profits  and  his  costs  and  in  its  appeal  to  the  consumer  for  a  fair 
understanding  of  the  grocer's  problems  before  preferring  blind 
charges  of  increasingly  high  prices  and  wilful  profiteering. 

If  the  percentages  of  gross  profit  based  on  selling  price  are  con- 
sidered fui-ther,  it  will  be  observed  that  certain  percentages  of 
profit  seem  relatively  high.  Onions,  for  example,  show  a  per- 
unit-quart  profit  of  40  per  cent,  yet  their  0.9  per  cent  volume  of 
trading  entr}%  shown  in  column  1,  Table  1,  must  be  considered  in 
estimating  their  relative  importance  as  an  item  of  business.  Pota- 
toes show  a  profit  of  23.53,  while  their  volume  of  purchase  is  2.9 
per  cent  —  less  than  one-thirtieth  of  the  total  volume  of  business. 
Cornmeal,  the  last  item  listed  and  the  least  by  volume  (0.1  per 
cent,  or  1/1000  of  the  total  volume  of  trading),  gives  what  con- 
sidered independently  would  seem  to  be  a  substantial  gross  profit  — 
24.16  per  cent  per  unit  pound,  but  a  gain  of  only  li/o  cents  for 
each  pound  weighed  and  wrapped. 

Referring  to  Table  2  and  comparing  one  product  with  another,, 
it  will  be  observed  that  butter  makes  about  one-half  the  percentage 
of  gross  profit  that  is  made  on  cheese  and  involves  the  expenditure 
of  somewhat  less  than  twice  the  capital  per  unit  pound.  On  the- 
othej  hand,  it  is  apparent  that  more  than  ten  times  the  quantity^ 
of  butter  was  sold  as  compared  with  cheese,  and  butter  proves  a 
leader  to  attract  trade. 

Again,  sugar  seems  to  make  about  half  the  percentage  of  gross 
profit  as  compared  with  that  made  on  canned  goods.  Moreover, 
each  pound  of  sugar  has  in  most  cases  to  be  weighed  and  wrapped 
and  tied.  On  the  other  hand,  rather  less  capital  is  required  for  an 
investment  in  sugar,  and  seven  to  ten  times  the  quantity  is  sold  as 
compared  with  canned  goods  of  various  kinds. 


14 

Rice  and  onions,  which  show  the  same  j^ercentage  of  volume  of 
trading  exhibit  a  rather  spectacular  contrast  in  profit —  14.81  per 
cent  and  40  per  cent  respectively.  Each  would  seem  to  require  an 
approximately  equivalent  degree  of  labor  in  the  way  of  weighing 
or  measuring  and  wrapping. 

Investigation  has  shown  that  the  greatest  difficulty  of  retailers 
has  in  the  past  been  ignorance  of  their  own  businesses,  and  that 
Buccess  has  ultimately  been  won,  if  won  at  all,  after  expensive 
trials  and  errors.  In  these  days  of  keen  competition  vague 
conceptions  of  the  laws  governing  business  are  not  conducive 
to  success,  and  on  the  contrary  are  often  the  cause  of  failure. 
The  grocer  should  gain  much  by  an  intimate  and  analytical 
acquaintance  with  his  stock  in  trade,  such  as  has  been  briefly  sug- 
gested in  the  foregoing  pages.  In  fact  he  should  thus  be  able  to 
accumulate  in  a  few  months  of  concentrated  and  systematic  study 
an  experience  that  otherwise  might  require  a  period  of  years  to 
gain  by  observation. 

It  will  prove  worth  while  for  the  retailer  to  compute  his  volume 
of  trading  for  each  commodity  handled,  but  he  should  not  stop 
there.  He  should  know  also  his  average  gross  profit  per  commod- 
ity unit,  his  percentages  of  gross  profit  based  on  selling  prices,  and 
the  comparative  labor  involved  in  handling  a  given  product.  He 
should  know  his  service  costs.  He  would  then  be  in  a  position  to 
make  comparisons  between  stocks  that  pay  and  those  that  do  not. 
He  could  also  determine  which  were  worth  featuring  as  leaders  to 
attract  trade  and  which  could  be  discarded  as  a  source  of  profit 
leakage. 

To  the  consumer  who  has  followed  the  exposition  here  set  forth, 
it  should  be  apparent  that  a  business,  in  which  50  per  cent  of  the 
trading  is  done  in  products  that  make  a  per  unit  profit  consider- 
ably below  the  average  percentage  for  expenses,  is  necessarily 
somewhat  hazardous.  This  is  especially  true  since  many  of  the 
products  handled  are  perishable  and  constant  vigilance  is  necessary 
in  order  to  prevent  waste.  Moreover,  the  profits  themselves  are 
small  and  the  labor  connected  with  handling  some  of  the  smallest 
profit  commodities,  large.  Added  to  these  considerations  are  the 
often  unreasonable  demands  of  consumers  for  elaborate  service,  a 
subject  on  which  the  succeeding  article,  "  Cash-and-Carry  Versus 
Credit-and-Delivery  Systems  "  should  throw  some  light. 


CASH-AND-CARRY  VERSUS  CREDIT-AND-DELIVERY 
SYSTEMS  IN  THE  RETAIL  GROCERY  STORE 

The  study  here  presented  has  been  deduced  from  data  obtained 
through  the  questionnaire*  circulated  by  agents  of  the  Federal 
Food  Board  and  covering  the  fiscal  year  ending  September  30, 
1918.  The  analysis  was  made  of  the  records  of  128  representative 
grocery  stores  located  in  various  parts  of  New  York  City,  and  the 
classification  of  these  stores  as  serving  poor,  middle,  or  wealthy 
class  neighborhoods  was  based  on  the  proprietor's  own  estimate  of 
the  type  of  trade  served.  For  example,  if,  in  reply  to  the  agent's 
question,  "  What  type  of  customers  give  you  their  patronage  ?  " 
the  grocer  replied,  "Average,"  the  grocery  was  recorded  in  the 
middle  class.  If  the  grocer  said,  "  Our  patrons  are  mostly  well-to- 
do,''  his  grocery  was  recorded  in  the  wealthy  class. 

Briefly  summarized,  certain  outstanding  data  compiled  from 
the  128  questionnaires  may  be  presented  as  follows: 

Poor  Middle         Wealthy          For  all* 

Number  of  stores 45  70                 13                   128 

Total  gross  sales $1,079,103  $3,051,491      $758,057       $4,889,051 

Average  sales  per  grocery...          23,980  43,592         58,342             38,195 
Rate   of   turnover   on   invest- 
ment                   9.2  8.7               6.6                   8.3 

Average    amount    of    capital 

invested    2,616  5,059           8,882               4,588 

Average     amount     of     credit 

outstanding    HO  596           3,125                  682 

Average     amount     of     stock 

carried    1J76  3,326            5,500                3,6S5 

*In  the  fourth  column,  all  averages  are  weighted. 

A  cursory  examination  of  the  statistics  set  forth  indicates  that 
average  sales  and  gross  margins  increase  from  the  poor  to  the  mid- 
dle, and  from  the  middle  to  the  wealthy  classes.  Turnover  on 
investment,  on  the  contrarv,  varies  in  the  reverse  order.  The  viean 
in  each  case  is  found  in  the  so-called  middle  class.  This  is  exactly 
the  situation  one  would  expect,  since  the  more  elaborate  the  service 
demanded,  the  greater  the  amount  of  capital  needed  and  the  larger 
the  quantity  of  stock  to  be  carried.  The  just  and  logical  conclu- 
sion, in  the  light  of  these  facts,  therefore,  would  be  that  gTOss  profit 

•  For  the  form  of  this  questionnaire,  see  page  26. 

[15] 


16 

and  net  return  should  respectively  increase  for  the  successive 
classes  in  the  order  of  poor,  middle,  and  wealthy.  Let  us  see  how 
the  facts  in  the  case  work  themselves  out. 

In  the  remainder  of  the  study  all  statistics  are  shown  in  per- 
centages of  gross  sales;  that  is,  in  each  case  total  gross  sales  is 
regarded  as  100  per  cent,  while  all  other  items  are  expressed  in 
terms  of  percentage  of  total  gi*oss  sales.  Thus,  for  Table  4  it  may 
be  deduced  that  100  per  cent,  or  gross  sales,  in  the  poor  neighbor- 
hood has  reference  to  the  ''Average  sales  per  grocery"  entry 
shown  in  column  1  of  the  foregoing  data,  or  $23,980.  Cost  of 
merchandise  averaged  84.8  per  cent  of  $23,980;  gross  profit,  15.2 
per  cent  of  the  same  figure.  Again,  100  per  cent,  in  the  middle- 
class  neighborhood  has  reference  to  the  $43,592  set  forth  in  column 
2  above;  in  the  wealthy  neighborhood,  to  $58,342  in  column  3,  and 
for  all  classes  to  the  weighted  average,  $38,195. 

In  Table  4  is  shown  in  percentages  according  to  each  class  of 
trade  served  a  summary  of  relative  operating  expenses  and  profits 
for  service  as  it  was  found  actually  existing,  that  is,  cash-and-carry 
and  credit-and-delivery  systems  in  combination.  The  percentage 
relations  set  forth  in  this  table  were  obtained  as  follows: 

1.  Told  gross  sales  were  allowed  to  equal  100  per  cent. 

2.  The  cost  of  merchandise  percentage  was  secured  by  dividing 
total  annual  purchases  by  total  annual  gi-oss  sales. 

3.  Gross  profit  represents  the  difference  between  the  percentage 
cost  of  merchandise  and  total  sales,  which  is  considered  100  per 
cent. 

4.  Each  item  included  in  Expenses  was  expressed  in  percentage 
by  dividing  the  sum  expended  for  that  item  by  gross  sales,  the  sum 
of  items  of  expense  being  expressed  collectively  as  expenses. 

5.  'Net  return  percentage  was  found  by  subtracting  the  percent- 
age for  expenses  from  the  percentage  for  gross  profits. 

Table  4. —  Relative  OPEaRATiNO  Expenses  and  Profits  for  Actual  Service. 
Expressed  in  Percentages  of  Gross  Sales 

Poor      Middle    Wealthy  For  all* 

(per  (per  (per  (per 

cent)  cent)  cent)  cent) 

Gross  sales  lOO  100  100  100 

Cost  of  merchandise 84.8  83.8  81.1  83.6 

Gross  profit 15.2  16.2  18.9  16.4 

Expenses 12.7  14.1  17.0  14.1 

Net  return   2.5  2.1  1.9  2.3 


17 


Poor      Middle    Wealthy  For  aU* 

T»  i.    -1       £                                                                        (per         (per             (per  (per 

Details  of  expenses                                                   cent)       cent)          cent)  cent) 

Salaries  and  wages 6.6           6.6           6.6  6.6 

Rent 2.2           2.3           2.8  2.4 

Delivery  cost  inward .1             .4             .6  .3 

Delivery  cost  outward .6           1.7           3.7  1.7 

Wrapping  supplies .9             .8             .7  .8 

Light,  heat,  and  power .3             .2             .2  .2 

Ice    5             .4,           .4  .4 

Interest  on  investment .5             .6             .8  .6 

Loss  from  bad  debts .3             .3             .3  .3 

Other  expenses   7             .8             .9  .8 

Total  expenses    12.7         14.1         17.0  14.1 

Analysis  of  salaries 

Proprietors'  salaries   4.5           3.9           2.8  3.7 

Wages,  members  of  family 1.5             .4             .4  .7 

Office  salaries 2             .8  .3 

Selling  wages 6           2.0           2.6  1.8 

Wages  other  employees .1     .1 

Total  salaries  and  wages 6.6           6.6           6.6  6.6 

*  In  the  fourth  column,  all  averages  are  weighted. 

By  eliminating  from  expenses  the  items  of  delivery  cost  and  of 
loss  from  credit  and  bad  debts,  the  percentages  shown  in  Table  4 
have  been  adjusted  in  Table  5  to  set  forth  expenses  and  profits  as 

based  on  a  100  per  cent  cash-and-carry  basis,  all  other  factors 
remaining  constant : 

Table  5. —  Relative  Operating  Expenses  and  Profits  fob  Service  on  a 
Strictly  Cash-and-Carry  Basis,  Expressed  in  Percentages  of  Gross 
Sales. 

Poor       Middle     Wealthy  PoraU* 

(per         (per            (oer  (per 

cent)       cent)          cent)  cent) 

Gross  sales 100          100          100  100 

Cost  of  merchandise 84.8        83.8         81.1  83.6 

Gross  profit 15.2         16.2         18.9  16.4 

Expenses   11.8         12.0        12.7  12.0 

Net  return  3.4          4.2          6.2  4.4 

Details  of  expenses 

Salaries  and  wages 6.6          6.6          6.6  6.6 

Rent    2.2           2.3           2.8  2.4 

Delivery  cost  inward .1             .4             .6  .3 

Delivery  cost  outward 

Wrapping  supplies .9             .8             .7  .8 

Light,  heat,  and  power .3             .2             .2  .2 

Ice    .5             .4             .4  .4 


18 


19 


Poor      Middle      Wealthy  For  all* 

Details    of    expanses  -  continued :                     *S>f)      X          i^n^)  cV'n?) 

Interest  on  investment .5             .5              5  5 

Loss  from  bad  debts 0             0             0  0 

Other  expenses   .7              3              g  g 

Total  Expenses  n.g        12.0        12.7         12.0 

Analysis  of  salaries 

Proprietors'  salaries  4.5  39  28  37 

Wages,  members  of  faniily 1.5  .4  4  7 

Office  salaries 2  8  3 

Sellingwages q  2.O  2.6  1.8 

Wages  other  employees ,  j  ^  ^  ^  ^  I 

Total  salaries  and  wages 6.6  6.6  6.6  6.6 

*In  the  fourth  column,  all  averages  are  weighted. 

In  the  case  of  poor  neighborhoo(is  the  net  return  on  the  cash- 
and-carry  basis  would  thus  be  greater  than  that  found "  in  actual 
service  by  0.9  of  one  per  cent  of  the  total  gi-oss  sales,  or  the  dif- 
erence  between  3.4  per  cent  (entry  5,  column  1,  Table  5)  and 
2.5  per  cent  (entry  5,  column  1,  Table  4)  ;  in  middle-class  neigh- 
borhoods, by  a  difference  of  2.1  per  cent;  in  wealthy  neighbor- 
hoods, by  a  difference  of  4.3  per  cent;  and  a  weighted  average 
difference  for  all  classes  of  2.1  per  cent. 

Having  found  the  percentages  that  would  result  if  the  retail 
grocery  businesses  were  run  on  a  strictly  cash-and-carry  basis,  a 
computation  of  expenses  and  profits  on  an  assumed  100  per  cent 
credit-and-delivery  basis  was  next  undertaken.  The  percentages 
resulting  are  shown  in  Table  6 : 

Table  6.— Relative  Operating  Expenses  and  Profits  for  Service  on  a 
100  PER  cent  Credit-and-Delivery  Basis,  Expressed  in  Percentages 
OF  Gross  Sales. 

Poor  Middle  Wealthy  For  all* 

,  (per  (per            (per            (per 

^              -                                                                        cent)  cent)          cent)           cent) 

Gross  sales 100  loo          100          100 

Cost  of  merchandise 34.8  83.8  81.1  83.6 

Gross  profit  152  I6.2  18.9  16.4 

^^^"ses    19  2  18.6  17.8  18.4 

Net  return  or  loss 4  ^  2      2 .4  -f  1 . 1       2  0 

Details  and  expenses 

Salaries  and  wages 6.6  6.6  6.6  6.6 

^^^^    2.2  2.3  2.8  2.4 

Delivery  cost  inward .1  ^4  g  3 

Delivery   cost  outward 6.0  5.2  4.3  5.2 


Poor 
_    ^    „        -  .         _  (per 

Details  of  expenses  —  continued:  cent) 

Wrapping  supplies .9 

Light,  heat,  and  power .3 

Ice    .5 

Interefet  on  investment .6 

Loss  from  bad  debts 1.3 

Other  expenses    .7 

Total  expenses 19.2 

Analysis  of  salaries 

Proprietors'  salaries 4.5 

Wages,  members  of  family 1.5 

Office  salaries  

Selling  wages .6 

Wages  other  employees 

Total  salaries  and  wages 6.6 


Middle 
(per 
cent) 

.8 

Wealthy 

(per 

cent) 

.7 

ForaU* 

(per 

cent) 

.8 

.2 

.2 

.2 

.4 

.4 

.4 

.8 

.9 

.9 

1.1 

.4 

.9 

.8 

.9 

.8 

18.6 

17.8 

18.4 

3.9 

2.8 

3.7 

.4 

.4 

.7 

.2 

.8 

.3 

2.0 

2.6 

1.8 

.1 

.1 

6.6 


6.6 


6.6 


In  the  case  of  poor  neighborhoods  a  net  loss  is  shown  on  the 
credit-and-delivery  basis  of  4.0  per  cent  (entry  5,  column  1,  Table 
6),  which  would  be  less  than  the  percentage  of  net  return  obtain- 
ing in  the  case  of  actual  service  by  6.5  per  cent,  (4.0  plus  2.5, 
entry  5,  column  1,  Table  4).  In  middle-class  neighborhoods,  a  net 
loss  of  2.4  per  cent  is  shown,  less  than  the  return  in  actual  service 
by  a  total  of  4.5  per  cent  (2.4  plus  2.1  equals  4.5).  In  wealthy 
neighborhoods,  a  gain  of  1.1  is  indicated  for  100  per  cent  credit- 
and-delivery  instead  of  net  loss  —  less  than  the  net  return  of 
actual  service  by  0.8  per  cent  (1.9  minus  1.1  equals  0.8).  For  all 
classes  credit-and-delivery  service  makes  and  average  of  4.3  per 
cent  less  than  actual  service  obtains  (2.3  plus  2.0). 

In  tables  7  and  8  is  shown  how  the  foregoing  table  was  derived. 
In  order  to  compute  the  percentages  in  Table  6,  it  was  necessary, 
first,  to  segregate  the  percentage  costs  of  delivery-and-credit  service 
respectively  as  they  actually  existed,  and  secondly,  to  divide  into 
the  respective  percentage  costs  the  proportions  of  delivery-and- 
credit  service  for  each  class  as  derived  from  the  original  data. 
The  percentages  in  Table  7  which  have  been  segregated  from  the 
column  on  expenses  in  Table  4,  indicate  the  cost  of  credit-and- 
delivery  in  actual  service: 

*  In  the  fourth  column  all  averages  are  weighted. 


20 


Table  7. — Items  ENTERI^'G  into  the  Cost  of  Credit-and-Deliveey  Service. 


Poor 

(per 

cent) 

Delivery   outward    .6 

Loss  from  bad  debts .3 

Interest  on  outstanding  debts* 

Total 9 


Middle     Wealthy 
(per  (per 

cent)  cent) 

1.7  3.7 

.3  .3 

.1  .3 


2.1 


4.3 


For  all 

(per 

cent) 

1.7 
.3 
.1 

2.1 


The  percentages  here  shown  appear  again  under  the  first/  fourth, 
and  fifth  entries  of  Table  8.  The  second  and  sixth  entries  of  Table 
8  show  respectively  the  proportion  of  business  delivered  and  of 
credit  extended  as  computed  from  the  original  data  of  the  question- 
naire. Entry  3  indicates  the  quotient  obtained  by  dividing  entry 
1  —  the  cost  of  delivery  outward  —  by  entry  2  —  the  proportion 
of  business  delivered  —  multiplied  by  100.  In  other  words  if  it 
costs  0.6  per  cent  of  the  total  gross  sales  to  deliver  10  per  cent  of 
th«  total  gross  sales,  it  will  cost  .06  to  deliver  1  per  cent.  On  a 
100  per  cent  delivery  basis,  therefore,  it  would  cost  6  per  cent 
of  the  gross  sales  (100  times  .06  equals  6). 

The  percentages  under  entries  4  and  5  added  together,  divided 
by  that  indicated  in  entry  6,  and  multiplied  by  100,  give  the  per- 
centage appearing  under  entry  7.  Entry  8  represents  the  sum  of 
entries  3  and  7.  These  are  the  percentages  which  show  the  cost 
oi  credit-and-delivery  on  a  100  per  cent  basis,  and  which  have  been 
added  to  the  corresponding  percentages  of  Table  4,  showing  actual 
service,  to  obtain  the  percentages  in  Table  6. 

Table   8. —  Relative   Expenses   Involved   in    100   Per   Cent   Cbedit-and- 

Deli\^by  Service 

Poor  Middle    Wealthy  For  all 

(per  (per            (per  (per 

cent)  cent)          cent)  cent) 

1  Delivery  outward 6          1.7          3.7  1.7 

2  Proportion  of  business  delivered 10.0        32.7        86.6        37.3 

3.De'ivery  outward — 100  per  cent  basis...       6.0  5.2  4.3  5.2 

4  Loss  from  bad  debts .3  .3  .3  .3 

5  Interest  on  outstanding  debts  * .1  .8  .1 

6  Proportion  of  credit  extended 19.4  27.0  75.1  33.3 

7  Credit  Serv:c2— 100  per  cent  la^s 1.3  1.5  .8  1.3 

8  Total  credit  and  delivery — 100  per  cent 

basis    7.3  6.7  5.1  6.5 

*  Subdivision  of  interest  on  investment  item  of  table  6. 


21 


GRArHic  Repeesentatiox  for  Various  Systems 

From  Fig.  4  which  pictures  the  net  return  percentages  shown  in 
Tables  4  and  5,  may  be  seen  the  relative  gain  for  stores  doing  busi- 
ness under  a  100  per  cent  cash-and-carry  system,  together  with  an 
indication  of  net  percentage  gain  that  exists  under  actual  service 
as  shown  in  Table  4. 

PERCENTAGE  OF 
NET  LOSS       NET  RETURN 


■  1  00%  CASH-AND-CARRY  SERVICE 
ACTUAL  SERVICE  (MIXED,  CASH-AND-CARRY,  AND 

CREDIT  DELIVERY) 

Fig.  4. —  Graphic  Repbesentation  of  Tables  4  axd  5,  Showing  a  Grocers 
Profits  when  Actual  Service  Rendered  is  Compared  with  a  100  Per  Cent 
Cash-and-Carey  Service. 

In  the  first  projection  of  each  group,  showing  the  percentages  of 
o-ain  for  stores  in  wealthy  nei«:hborhoods,  it  is  at  once  evident  that 
more  than  three  times  the  net  return  actually  gained  at  present 
could  be  secured  under  a  system  of  cash-and-carry,  while  in  the 
second  group  showing  percentages  of  gain  for  middle-class  stores 
it  is  apparent  that  about  twice  the  net  profit  could  be  made  if  the 
middle-class  neighborhood  were  served  under  the  cash-and-carry 
system.  Among  stores  operating  in  poor  neighborhoods,  on  the 
other  hand,  the  gain  under  the  cash-and-carry  system  would  be 
comparatively  slight  —  less  than  one-third  over  that  which  is  real- 
ized in  actual  service.  The  reason  for  this  variation  is  to  be 
sought  in  Table  8,  from  which  it  may  be  deduced  that  stores  oper- 
ating in  a  wealthy  neighborhood  deliver  all  but  13.4  per  cent  of 
their  merchandise  and  extend  credit  to  all  but  24.0  per  cent  of 
their  customers.  In  middle-class  neighborhoods  on  an  average 
67.3  per  cent  of  goods  sold  are  carried  home  by  customers  and  73 


22 

per  cent  of  the  customers  pay  cash.  In  poor  neighborhoods  the 
great  bulk  of  the  sales  —  90  per  cent  are  carried  and  80.6  per  cent 
of  the  business  is  for  cash. 

It  is  not  surprising  that  stores  serving  wealthy  neighborhoods 
would  be  by  fai-  the  largest  gainers  if  delivery  costs  were  to  cease 
on  more  than  86  per  cent,  and  credit  losses  on  75  per  cent,  of  their 
total  sales.  In  the  same  way  it  is  apparent  that  a  store  in  a  poor 
neighborhood,  which  in  actual  service  is  delivering  only  10  per 
cent  of  its  merchandise  and  extending  credit  to  only  20  per  cent  of 
its  trade,  can  make  only  a  slight  net  gain  by  installing  100  per 
cent  cash-and-carry. 

The  differences  in  extension  between  the  shaded  projections  of 
each  group  in  Fig.  4  may  be  regarded  as  showing  what  the  mer- 
chant might  give  back  to  his  customers  and  still  make  his  normal 
profit  if  he  were  freed  from  credit-and-delivery  expenditure.  In 
the  wealthy  neighborhood  it  will  be  seen  that  this  would  mean  the 
equivalent  of  4.3  per  cent  or  .043  cents  on  the  dollar,  in  middle- 
class  neighborhoods  2.1  per  cent  or  .021  cents,  and  in  poor-class 
neighborhoods  0.9  per  cent  or  .009  cent  on  the  dollar.  If  computed 
from  the  "Average  sales  groceries  "  item  on  page  13,  this  would 
amount  to  a  return  to  consumers  in  wealthy  neighborhoods  of 
$2,508.70  on  average  yearly  sales  amounting  to  $58,342 ;  in  mid- 
dle-class neighborhoods  $915.43  on  sales  amounting  to  $43,592; 
and  in  poor  neighborhoods  $215,  by  eliminating  credit-and-delivery 
factors. 

The  same  principle  may  be  illustrated  differently:  The  con- 
sumer who  trades  in  a  well-to-do  neighborhood  and  buys  ten  dol- 
lars' worth  of  groceries  a  week  —  $520  worth  a  year  —  pays 
$22.36  a  year  for  having  those  goods  delivered  and  for  the  con- 
venience of  credit  extended.  It  may  easily  be  worth  this  amount 
to  the  housewife  to  have  her  supplies  delivered,  but  it  must  be 
pointed  out  that  her  rate  of  delivery  is  lower  because  of  the  fact 
that  some  who  trade  at  this  store  carry  their  own  supplies  and  ask 
no  credit.  The  question  for  the  customer  who  carries  her  food 
and  pays  cash  to  decide  is  whether  she  is  willing  to  pay  at  the 
rate  $22.36  a  year  to  have  her  neighbor's  groceries  delivered. 

From  Fig.  5  it  may  be  seen  what  would  happen  if  all  customers 
availed  themselves  of  credit-and-delivery.  Stores  serving  wealthy 
neighborhoods  could  continue  to  operate  at  a  net  profit  margin  of 


23 


1.1  per  cent,  because  as  has  been  observed  in  Table  5,  they  are 
already  giving  credit  to  75  per  cent  of  their  trade  and  delivering 
86  per  cent  of  their  sales,  so  that  a  100  per  cent  credit-and-delivery 
service  would  mean  comparatively  little  adjustment  of  their  pres- 
ent system.  Grocers  in  middle-class  neighborhoods  could  operate 
only  at  2.4  per  cent  net  loss,  while  those  serving  poor  neighbor- 
hoods would  lose  4.0  per  cent. 

In  order  to  continue  in  business  under  the  100  per  cent  credit- 
and-delivery  system,  and  make  his  normal  profit,  the  grocer  in  a 
poor  neighborhood  would  have  to  charge  his  customers  $1,061/2 

PERCENTAGE   OF 
D  >     NET  LOSS       NET  RETURN 

8  h  ^ '1 1 '1 2 1 i 1 2 1 


ACTUAL     SERVICE     (MIXED, 

AND  CREDIT  DELIVERY) 
10O%  CREDIT-AND-DELIVERY 


4  S  6 

CASH-AND-CARRY, 


Fig.  5. —  Graphic  Representation  op  Tables  4  and  6,  Showing  a  Grocer's 
Profits  or  Losses  when  Actual  Service  Rendered  is  Compared  with  a  100 
Per  Cent  Credit-and-Delivery  Service. 

cents  for  every  dollar's  worth  of  goods  they  bought,  and  in  the 
middle-class  neighborhood  $1,041/2-  In  the  100  per  cent  credit 
and  delivery  business  in  the  wealthy  neighborhood  the  grocer 
would  only  have  to  charge  about  %ths  cent  more  on  the  dollar 
because  he  is  practically  doing  a  credit  and  delivery  business  at 
present. 

From  this  exposition  it  is  apparent  that  consumers  in  a  poor 
neighborhood  who  are  receiving  credit  and  delivery  accommoda- 
tions are  really  receiving  $1.06%  cents  worth  of  service  for  every 
dollar  expended  and  the  extra  6%  cents  is  being  paid  by  fellow 
consumers.  To  be  sure,  only  10  per  cent  demand  delivery  and 
20  per  cent  credit,  so  that  the  6%  cents  has  to  be  paid  for  only  a 
small  percentage  of  the  total  trade,  and  for  this  reason  the  burden 


24 

of  the  credit-and-delivery  is  not  more  keenly  felt  bj  those  who 
cash-and-carry  in  poor  neighborhoods.  In  principle,  however,  it 
IS  none  the  less  unfair.  The  customer  demanding  maximum  serv- 
ice is  really  forcing  higher  prices  upon  persons  who  would  will- 
ingly purchase  the  goods  alone,  or  in  other  words  taking  an  imfair 
advantage  of  the  woman  who  would  economize. 

It  should  be  obvious  to  those  who  object  to  paying  credit-and- 
delivery  expenses  for  fellow  consumers  that  cash-and-carry  busi- 
nesses should  be  encouraged  in  thoir  own  neighborhoods  and  that 
those  who  desire  c red it-and-deli very  accommodations  should  be 

PERCENTAGE    OF 
NET  LOSS  NET    RETURN 


CASH-AND-CARRY  100% 
ACTUAL  SERVICE 

CREDIT-AND-DE  LIVERY  100% 

6. —  Graphic  Represextation  of  Tables   4. 


mm 


Fig.  0.— uraphic  Kepresextation  of  Tables  4.  5  and  G,  Showixg  a 
Grocer's  Losses  and  Profits  Comparatively  for  100  Per  Cent  Cash-and- 
Carry  Service,  Actual  Service,  and   100  Per   Cent  CREDiT-AND-DEuvTiRY 

Service. 

permitted  to  bear  the  entire  percentage  charge  at  stores  which 
cater  especially  to  that  type  of  patronage.  Under  the  present 
mingling  of  credit-and-delivery  and  cash-and-carry  in  actual  serv- 
ice, however,  the  average  retailer  is  selling  both  goods  and  service. 
Theoretically  he  should  have  two  scales  of  prices  —  one  for  goods 
and  another  for  goods  plus  sei-vice.  Practically,  however,  it  is 
obvious  that  he  could  scarcely  maintain  two  scales  of  prices,  since 
such  action  would  be  impossible  of  adjustment  among  customers 
requiring  varied  degrees  of  delivery  and  of  credit  service. 


\i3 


Conclusions : 

1.  Net  return  increases  with  Cash-and-carry  service  for  each 
class. 

2.  ^et  return  decreases  with  Credit-and-delivery  service  for 
each  class. 

3.  Wealthy  class  neighborhoods  would  gain  most  by  Cash-and- 
carry  sei*vice.  Poor  class  neighborhoods  would  gain  least  by  Caslv- 
and-carry  service. 

4.  Wealthy  class  neighborhoods  would  lose  least  by  Credit-and- 
delivery  service.  Poor  class  neighborhood  would  lose  most  by 
Credit-and-delivery  service. 

5.  Middle-class  neighborhood  stores  hold  the  mean  in  every  case. 

PERCENTA.GE      OF 
NET  L055  NET   GA\N 


CASH-AND- 
CARRY 

SLRVICC 


ACTUA.I. 
SERVJCe 


CREOlT-AHD" 

DELiVERY 

SERVICE 


WEALTHY  CLASS  NEIGHBORHOOD 
MIDDLE  CLASS  NEIGHBORHOOD 
POOR  CLASS  NEIGHBORHOOD 

Fig.  7. —  Rearrangement  of  Figs.  4,  5  and  6  by  Service  Groups  to  Show 
Contrasts  Betwekn  Casii-and-Cakry,  Actual  and  Credit-and-Deliveky 
Service. 

The  same  percentages  inustratcd  in  Figs.  4,  5,  and  6  have  been 
rearranged  in  Fig.  7  by  service  groups  to  show  contrasts  between 
cash-and-carry,  actual,  and  credit-and-delivery  systems. 

It  is  interesting  to  note  both  in  the  case  of  the  cash-and-carry 
system  and  the  credit-and-delivery  that  the  percentage  of  profit 
varies  inversely  in  the  different  classes  from  what  it  does  in 
actual  service.  For  example,  both  under  cash-and-carry  and  credit- 
and-delivery  the  store  in  the  wealthy  neighborhood  makes  the 
largest  rate  of  percentage,  while  in  the  poor  neighborhood  the 


¥ 


26 

lowest  percentage  of  profit  and  the  greatest  percentage  of  loss  is 
made.  Under  actual  service  on  the  contrary,  the  lowest  net  per- 
centage of  profit  is  made  by  the  wealthy  store  and  the  highest  in 
the  poor  store.  This  bears  out  the  facts  set  forth  in  the  statistics 
shown  on  page  13. 

Cash-and-Carry  Wholesale  Buying 

Out  of  the  cash-and-carry  versus  credit-and-delivery  discussion 
the  retailer  may  well  take  a  lesson  to  himself,  for  economic  buy- 
ing is  as  much  a  part  of  his  business  as  is  economic  selling.     If  he 
patronizes  a  wholesale  house  that  is  carrying  numerous  small  mer- 
chants on  long-time  credit,  and  parceling  out  goods  to  them  in 
small  lots,  he  may  expect  to  pay  that  wholesaler  high  percentages 
of  profit  to  make  up  his  losses  on  others.    On  the  other  hand,  if  he 
trades  with  wholesalers  doing  a  thirty-day  cash  business,  whole- 
salers who  sell  merchandise  in  large  unbroken  lots,  and  who  are 
making  quick  turnover,  he  can  expect  benefits  comparable  to  those 
of  the  retail  customer  who  patronizes  the  cash-and-carry  grocer. 
This  is  the  way  out  for  the  grocer  who  is  experiencing  the  difficul- 
ties of  chain-store  competition.     If  the  chain-store  has  undersold 
him,  it  is  because  of  its  advantage  of  participating  in  purchasing 
food  in  bulk.    Instead  of  paying  the  purchase  price  on  one  case  of 
oranges  for  example,  it  stands  only  its  pro  rata  share  on  the  car- 
load.   The  grocer  who  w^ould  meet  this  competition,  therefore,  may 
organize  with  other  independent  grocers  who  are  feeling  a  similar 
need  and  through  the  cooperative  purchasing  association  meet  the 
chain  store  on  its  own  ground,  buying  his  oranges  at  carload  rates 
also. 

Conclusion 

A  saving  of  four  cents  on  the  dollar  under  the  cash-and-carry 
system  in  a  well-to-do  neighborhood,  or  two  cents  in  a  middle- 
class  neighborhood,  may  or  may  not  seem  a  substantial  amount  to 
the  consumer.  "  For  two  cents  or  four  cents  carry  home  a  dollar's 
worth  of  groceries  in  a  market  basket !  "  a  housewife  may  disdain- 
fully exclaim,  and  in  those  words  she  expresses  her  standard  of 
living.  For  the  woman  who  can  afford  servants,  store  delivery  of 
food  may  be  far  more  economical  than  an  expenditure  of  the  serv- 
ant's time  in  going  to  and  from  the  grocery.    For  another  woman, 


27 


country  air  and  reasonable  rent  in  the  suburbs  may  more  than  com- 
pensate the  waste  incurred  in  telephone  orders  and  credit-and- 
delivery  service.  The  degree  to  which  the  purchaser  values  her 
freedom  is,  therefore,  another  factor  to  be  considered  in  choosing 
between  cash-and-carry  and  credit-and-delivery  practices.  It  is 
thus  that  social  and  economic  demands  tend  to  determine  prices. 
To  those  who  express  astonishment  that  the  savings  effected  by 
the  cash-and-carry  system  are  not  greater,  we  would  respond  that 
credit-and-delivery  represents  but  one  leak  in  the  poor  Ship  of  the 
High  Cost  of  Living  and  that  it  is  not  until  we  have  the  sum  total 
of  the  leaks  that  we  find  a  large  reason  for  high  prices.  It  is  not 
within  the  scope  of  this  article  to  analyze  contributing  leaks. 
Sufiice  it  to  say  that  the  demand  for  goods  put  up  in  small  fancy 
packages  —  quarter-pound  bricks  of  butter  and  six-ounce  jugs  of 
olive  oil  —  fastidious  tastes  for  foods  out  of  season,  the  customer's 
indifference  to  receiving  his  just  weight  and  measure,  and  uneco- 
nomical buying  practices  on  the  part  of  the  retail  merchant  —  all 
these  are  sources  of  increase  in  costs  to  the  consumer  worthy  of 
consideration  and  research.  The  sum  total  percentage  of  such 
wastes  would  in  all  probability  surprise  the  consumer  who  disre- 
gards any  one  of  them  as  being  too  trivial  or  too  inapplicable  to 
affect  her  o^vn  mode  of  purchasing. 


f 


REPORT  FOR  RETAIL  GROCERS 

For  fiscal  year  ending 

1.  Naine 

2.  Location  of  store JSt Borough 

3.  Form  of  organization Xo.  of  active  partners 

4.  Date  of  establishment  of  business 

5.  Class  of  customers 

G.  Average  number  of  customers  served  dailv 

7.  What  percentages  of  total  sales  are  the  following: 

Credit Cash Delivery Carry 

8.  Average  amount  of  credit  outstanding 

9.  Average  amount  of  stock  carried 

10.  Average  length  of  time  credit  is  extended 

11.  Did  any  members  of  the  family  assist  you  in  the  business  dur- 

ing 1917  without  compensation? If  so,  fill  in 

the  following: 

Relationship 

Capacity  in  which  employed 

IN'uniber  of  hours  employed  daily .< 

!N'umber  of  months  employed  in  1917 

Estimated  value  of  services  a  week 

12.  Has  this  report  been  made  from  books  kept  by  double  entry  ? 

By  single  entry  ? 

13.  If  you  have  no  regular  set  of  books,  please  answer  "  yes  "  or 

"  no  "  to  the  following: 

(a)  Do  you  keep  a  record  of  daily  receipts  and  expenditures  ? 

(b)  Do  you  deposit  all  receipts  in  the  bank  and  make  all  pay- 

ments except  petty  cash  payments  by  check  ? 

(c)  Did  you  obtain  the  figures  furnished  by  you  in  this  report 

from  your  cash  records  ? 

(d)  If  not,  state  from  what  sources  you  obtained  the  figures 

furnished  ? 


1917 


14.  Total  volume  of  sales , 
15   Cost  of  merchandise. . 

16.  Gross  profit. 

17.  Expenses 


1918 


128] 


29 


1917 


1918 


18.  Net  profit 

19.  Merchandise     inventory     at     be- 

ginning  

20.  Purchases  during  year 

21.  Total 

22.  Less  —  Merchandise  consumed  for 

own  use 

23.  Inventory  at  end 

24.  Total  deductions 

25.  Cost  of  merchandise 

26.  Breakage,  shrinkage  and  spoilage 

included  in  24 

27.  Rent  (exclusive  of  living  quarters) 

28.  Delivery  cost  inward 

29.  DeHvery  cost  outward 

30.  Wrapping  supplies 

31.  Light,  heat  and  power 

32.  Ice 

33.  Officers'  salaries.    No 

34.  Branch  managers' 

salaries  No.  of  emp 

35.  Office  salaries  No 

36.  SeUing  wages  No 

37.  Wages    other     employees 

38.  Loss  from  bad  debts 

39.  Other  expenses 

40.  Total  expenses 

41.  Stable,  rent  and  food 

42.  Horseshoeing 

43.  Veterinary  service 

44.  Repairs  to  wagons  and  harness .... 

45.  Insurance 

46.  Depreciation 

47.  Other  expenses 

48.  Total  expenses,  horses  and 

wagons 

49.  Garage  rent 

50.  Gasoline  and  oil 

51.  Tires 

52.  Repairs 

53.  Accessories 

54.  Insurance 

55.  Depreciation 

56.  Other  expenses 

57.  Total  expenses,  automobiles. . . 

58.  Wages    (drivers,     chauffeurs,    de- 

livery boys,  etc.) 

59.  Total  dehvery  costs  other  than 

cartage  and  expressage . . . 


30 


60 


61. 

62. 
63. 
64. 
65. 
66. 
67. 
68, 
69. 
70. 
71. 
72. 
73. 
75. 
76. 
77. 

78. 
79. 
80. 
81. 
82. 
83. 

84. 
85. 
86. 


1917  1918 

Percentage  of  item  No.  59  appli- 
cable to  delivery  cost  inward  — 
per  cent 

Percentage  of  item  No.  59  appli- 
cable to  delivery  cost  outward . . 

Cartage  and  expressage 

Stationery  and  office  supplies 

Telephone 

Carfares  and  gratuities 

Advertising 

Donations,  presents,  etc 

Coat  and  apron  supply 

Removal  of  rubbish 

Window  cleaning 

Sawdust 

Repairs  to  equipment  and  fixtures. 

Insurance 

Depreciation 

Other  expenses 

Total  other  expenses 

.    .  Originar  Rate  of 

Depreciation  on  equipment cost         Dep.      Amount 

Horses  and  wagons 

Automobiles 

Store  equipment  and  fixtures 

Personal  cash  withdrawals 

Net  capital  investment  at    begin- 
ning   

Net  capital  investment  at  end 

Average  amount  of  total  weekly  sales  $ 
Average  amount  of  weekly  sales  of  the  following: 
Butter    $  Sugar  $ 

|ggs>      S  MUk,  fluid  $ 

Flo^r      $    *  Milk,    condensed    and 

evaporated,  $ 


t 


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